International Women’s Day, on March 8, reminds us every year that while the financial services industry has taken steps in the right direction regarding gender diversity, we still have a long way to go. Not only do we need better gender balance within the industry, but we need to improve how we support the financial lives of women.

The landscape for women in finance has changed considerably over the past several decades. Gender diversity is now recognized as a strategic issue that affects business outcomes, with members of the industry now devoting more creativity and commitment to attracting, recruiting, and retaining women. Today, women represent 57 percent of the total employee workforce within Canada’s six largest banks, according to a study by the Canadian Bankers Association. However, this growth has been predominantly at the junior level, with women representing only 38 percent of the top ranks in finance. When you narrow it down C-suite positions, the number falls even further to a mere 10 percent of financial services firms in Canada run by women.

Why does this gender gap persist?
The representation gap between the numbers of women at the most senior ranks and at more junior levels in finance is stark. One factor is slower rates of advancement. A study by McKinsey in 2018, titled “Closing the gap: Leadership perspectives on promoting women in financial services,” found that women, and women of colour in particular, are significantly less likely than men to attain their fi­rst promotion, which can be a critical first step up the corporate ladder. Women are also more likely to experience challenges balancing work and family, which is not surprising given the fact that, as women’s responsibilities at work increase with seniority, they largely maintain their responsibilities at home. The McKinsey study found that nearly half of senior-level women report they continue to shoulder most household responsibilities, while just 13 percent of their male peers say the same. A 2019 study by global management consultancy Oliver Wyman, “Women in Financial Services 2020,” showed that women tend to have shorter careers within the industry and that the drop-off tends to occur at the mid-career point, in large part due to the challenges women face balancing their careers and family lives.  

“There is a 90 percent drop-off rate from entry level to C-suite for women of colour in financial services.”

When you consider the effects of COVID-19 on the economy and financial sector, the gap has widened further. Women, particularly those with young children, have come to bear the brunt of the global pandemic and the ensuing economic recession. A survey by Women in Capital Markets (WCM) last summer found that nine percent of women in the financial industry said they were considering quitting their jobs, and the same percentage had asked for a leave of absence. Ultimately, this gender gap disrupts the executive pipeline for women, putting them at a disadvantage for advancement within the industry while also disadvantaging their firms, who can no longer benefit from a diverse and skilled cohort of employees.

Impact of the gap on financial firms
Evidence has shown that diversity within firms can drive innovation and increase productivity. At the leadership level in particular, gender diversity has been linked to boosts in profitability. Therefore, it is not surprising that 34 percent of CEOs globally recently ranked diversity and other societal impact indicators as a key measure of success when evaluating firm performance.

More broadly, lack of diversity in the senior ranks can also potentially affect a firm’s access to capital. A year from now, issuers included on the S&P/TSX composite index will be expected to have women comprise at least 30 percent of their boards, or a written gender diversity policy that includes a commitment to achieve at least 30 percent female board representation over a reasonable timeframe. In the U.S., NASDAQ has gone so far as to propose mandating diversity and inclusion on the boards of publicly listed companies. In an industry that actively seeks differentiated and uncorrelated portfolio risk, missing a group of employees that brings diversity to idea generation and strategy presents a tangible loss to financial services firms.

Impact of the gap on the financial lives of women
Another benefit of a diverse workforce is that it can enable organizations to better understand different segments of the population, anticipate their needs, and deliver to them. This is increasingly important for firms in Canada’s concentrated financial services industry, whose future growth depends on successfully serving those increasingly diverse markets and clients.

Canadian women directly control no less than C$2.2 trillion in personal financial assets—an amount that will grow by more than 70 percent in the coming decade, assuming a continuation of recent growth trends. Yet research published by Oliver Wyman shows there is still a default toward men’s needs and preferences in the approaches of most financial institutions. For example, traditional wealth planning assumes income will increase steadily year after year. On average, this is more likely to be true for men than women, due to career breaks for caregiving. Add the fact that women tend to retire earlier, live longer, and have higher medical expenses, and standard retirement planning quickly appears ill-suited to the average woman.

Financial services firms have touch points with people throughout their lives, which means their products, services, and other initiatives could support more gender balance at every stage. This does not mean giving female clients a significantly different experience from that of their male counterparts. However, most firms would do well to build a greater awareness of women’s needs into the products and services they offer in order to better support this important client demographic.

Creating a better financial future for women
While progress has been made on gender balance in the industry, a different approach is needed to take its changing attitudes women to the next level. It is more important than ever that our industry look for broader ways to support women, both as employees and as clients, especially given the disproportionate effect the coronavirus pandemic has had on their lives. To deliver the next wave of progress, all of us in the industry will need share the responsibility for creating change and recognize that persistent gender gaps in our industry deeply affect the financial lives of women and economy as a whole. Until we have achieved better gender balance in our ranks and in the way we engage with our clients, our mission is not complete.